Emerson Posts 2017 Q4 Financial Results

By Ankit Ajmera

(REUTERS) – Emerson Electric Co. gave marginally weaker earnings guidance for 2018 than Wall Street had expected on Tuesday, sending shares in the U.S. factory automation equipment maker down as much as 2.8 percent.

Emerson said adjusted net earnings per share for fiscal year ending September, 2018 were expected to be $2.85 at the mid point, compared with an average analysts' estimate of $2.90 per share, according to Thomson Reuters I/B/E/S.

It expects full year net sales to rise by 8 percent to 10 percent, compared with the 11.8 percent increase expected by Wall Street.

The St. Louis, Missouri-based company said cooler weather and the disruption from hurricanes weighed on its commercial and residential solutions business, which makes air conditioning compressors and Wi-Fi thermostats and is its second biggest.

Sales in the unit rose 4 percent but margins fell 60 basis points to 24.7 percent in the fourth-quarter ended Sept. 30, with Emerson pointing to a change in the makeup of sales towards its lower margin products as one reason for the decline.

It said cooler weather and hurricanes had slowed down its North America compressor replacement business.

“There was a bit more pressure on Climate margins during the quarter, which is likely attributable to raw material inflation,” Morgan Stanley analyst Nigel Coe wrote in a note.

The company said it expects to recover sales lost due to the hurricanes over the next twelve months as damaged areas rebuild.

Sales in the company's automation solutions business, its largest, improved 18 percent, helped by stabilizing demand in the oil and gas industries. Margins increased 300 basis points to 20.2 percent.

The business makes products including measurement instrumentation, valves and regulators for the oil and gas sectors. The unit had been struggling as customers curtailed spending due to a slump in oil prices.

Overall, September trailing three-month orders rose 11 percent, Emerson said.

In October, Emerson made an unsolicited acquisition bid for smaller rival Rockwell Automation, Inc. for more than $27 billion, as it looked to diversify its businesses and reduce exposure to volatile energy prices.

Rockwell, however, rejected the bid arguing that the offer undervalued the company.

Shares of Emerson were down 2.5 percent at $62.88 in morning trading.

Up to Monday's close, Emerson's stock had risen 15.7 percent this year, compared with a 15.6 percent increase in the S&P 500 index.

View Q4 2017 Financial Tables

(Reporting by Ankit Ajmera in Bengaluru; Editing by Maju Samuel)


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